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Nirmala Sitharaman announces reforms to slash defence import expenditure

Nirmala Sitharaman mentioned that the FDI limit in defence manufacturing under the automatic route will be raised to 74 per cent from 49 per cent now.

Written by Krishn Kaushik | New Delhi |
May 17, 2020 1:54:28 am
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With an aim to reduce India’s import bill for the defence sector, Union Finance Minister Nirmala Sitharaman on Saturday said the government will bring reforms to make India more self-reliant in defence production.

The main moves include corporatisation of Ordnance Factory Board (OFBs), raising FDI limits in defence manufacturing, having a time-bound procurement process, notifying a list of weapons that cannot be imported and indigenisation of spares, she said.

India is among the top three importers of arms in the world. In March, MoS, Defence, Shripad Naik told Parliament that India imported defence equipment worth Rs 45,705.57 crore in 2018- 2019.

India has been gradually increasing the indigenisation of the defence platforms. The share of indigenisation in defence platforms went up from 72.4 per cent in 2016-2017 to 75.9 per cent in 2018- 2019.

The government Saturday said there will be a notified list of weapons and platforms that will be banned for imports and there will be a push towards “indigenisation of imported spares”. The list of equipment banned for imports will be prepared by the Department of Military Affairs headed by the Chief of Defence Staff. The government will, however, allow import of necessary equipment not manufactured in India.

Read FM Nirmala Sitharaman Speech HIGHLIGHTS

Sitharaman mentioned that the FDI limit in defence manufacturing under the automatic route will be raised to 74 per cent from 49 per cent now.

On the corporatisation of the 41 ordnance factories to “improve autonomy, accountability and efficiency in ordnance supplies”, Sitharaman said they may even be listed on stock markets for greater transparency.

Read | Defence worker unions oppose corporatisation of OFB, increased FDI in manufacturing

It has been a long-pending idea, which has been fraught with controversy. Last year, thousands of workers of ordnance factories went on a strike against “privatisation”. The strike ended after the government assured them that there was no plan to privatise.

Corporatising ordnance factories was part of the government’s 100-day agenda after the BJP returned to power.

Several committees appointed by the government have recommended corporatisation of OFB.

Project Management Units will be set up to support management of contracts, Sitharaman mentioned, and said that the unrealistic performance criteria for equipment in the past had resulted in delayed search and single vendor selection. She said that realistic General Staff Qualitative Requirements of weapons and platforms will be set.

The government will also overhaul the trial and testing procedures.

On Friday, the Defence Ministry had announced a new scheme for private players to set up common testing infrastructure in the country for defence and aerospace, in partnership with the government.

The terms of reference of the 15th Finance Commission were changed last year to look into creating a separate and non-lapsable fund for defence and national security.

Saturday’s announcement comes a day after India signed a deal to buy 24 MH-60R helicopters from American arms giant Lockheed Martin for over US$ 2 billion. The deal was announced when US President Donald Trump came to India in February.

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